Review of 2016, outlook for 2017 – looking better despite the political noise

2016 – a messy but okay year

Key points

2016 started badly for investors with worries about global growth and deflation. But global growth turned out okay &, despite political events, rising bond yields & disappointing Australian growth, the end result has been a constrained but okay year for diversified investors.

2017 is likely to see another year of okay & maybe even slightly higher global growth, higher inflation, higher bond yields after a pause and divergent monetary conditions as the Fed tightens but other countries stay easy. The RBA is likely to cut rates to 1.25%.

Most growth assets, including shares are likely to trend higher, resulting in reasonable returns in 2017.

The main things to keep an eye on are US policy under Trump (stimulus v trade wars), the Fed and the $US, bond yields, various European elections, China and the impact of the rising supply of apartments in Australia.